Guanwei says Fuqing investment 'highly preliminary'

China's Guanwei Recycling Corp., one of the country's largest processors of reclaimed low density polyethylene, responded to a Chinese media report of its signing a document to invest $60 million at its headquarters in Fujian province.

In a May 23 statement, Guanwei said it had no "firm" plans to expand its production facilities, in spite of a report in the Fuzhou Daily, a government-owned newspaper in Fuzhou, capital city of Fujian province, that it had signed an agreement May 17 with local officials to make the investment.

The paper said half the $60 million would be foreign investment, without providing more details.

But Guanwei, which is traded on the NASDAQ stock exchange in the United States, said in the statement that it had only signed a preliminary, non-binding agreement with the local government in Fuqing city, Fujian, where it is headquartered.

"'The company … believes this actually refers to a non-binding letter of intent it recently signed with the local government in Fuqing which normally it would not wish to or be required to disclose given its non-binding, highly preliminary nature," Guanwei said.

"There are no firm plans in place to expand its production facilities in current market conditions," the company said. "Any such expansion would certainly be announced to shareholders on a timely basis."

Guanwei's statement did not say why it signed the letter of intent and it did not explicitly say the Fuzhou Daily report was false.

In a May 15 earnings report, the company said its first quarter sales shrank 20 percent year-on-year to $11.8 million and net profit contracted by two-thirds to $750,000.

It blamed a worse-than-expected slump in demand, higher costs from the country's Green Fence environmental crackdown and labor shortages. Its stock price has dropped 60 percent since mid-March.